16. LO.2, 3 Seth, Pete, Cara, and Jen form Kingfisher Corporation with the following consideration:

Consideration Transferred Basis to Transferor Fair Market Value Number of Shares Issued From Seth—
Inventory $30,000 $96,000 30*
From Pete—
Equipment ($30,000 of depreciation taken by Pete in prior years) 45,000 99,000 30**
From Cara—
Proprietary process 15,000 90,000 30 From Jen—
Cash 30,000 30,000 10 Assume that the value of each share of Kingfisher stock is $3,000. As to these transactions, provide the following information:

a. Seth’s recognized gain or loss. Identify the nature of any such gain or loss.

b. Seth’s basis in the Kingfisher Corporation stock.

c. Kingfisher Corporation’s basis in the inventory.

d. Pete’s recognized gain or loss. Identify the nature of any such gain or loss.

e. Pete’s basis in the Kingfisher Corporation stock.

f. Kingfisher Corporation’s basis in the equipment.
g. Cara’s recognized gain or loss.
h. Cara’s basis in the Kingfisher Corporation stock.
i. Kingfisher Corporation’s basis in the proprietary process.
j. Jen’s recognized gain or loss.
k. Jen’s basis in the Kingfisher stock.
l. During discussions relating to the formation of Kingfisher, Seth mentions that he may be interested in either (1) just selling all of his inventory in the current year for its fair market value of $96,000 or (2) proceeding with his involvement in Kingfisher’s formation as shown above but followed by a sale of his stock five years later for $90,000. What would be the tax cost of these alternative plans, stated in present value terms? Referring to Appendix E, assume a discount rate of 6%. Further, assume that Seth’s marginal income tax rate is 35% and his capital gains rate is 15%.
m. Prepare your solution to part (l) using spreadsheet software such as Microsoft Excel.